David Young, CPA from Young & Company CPAs LLP joined Katrina Irwin on News 8 at Sunrise Monday.
He talked about some potential tax changes that are on the horizon.
Young says unless Congress and President Barack Obama can reach agreement by the end of this year, steeply higher taxes, amounting to about half a trillion dollars annually, will slam the economy and most taxpayers, starting Jan. 1, 2013.
This would also make next year's Tax Day considerably more painful than it was this year.
American households could face an average tax increase of $3,800. 70 percent of tax changes would fall directly on low-income and middle-income families. That's about $346 billion less for families to spend and a whole lot more for government to spend.
Because this disagreement on tax policy is not yet reconciled, roughly 100 tax cuts are set to expire at the end of this year and a half-dozen new taxes to pay for the Obama health law are set to take effect Jan. 1, 2013.
Alternative minimum tax: Twenty-five million more middle-income taxpayers will be hit in 2013 with an estimated $118 billion in higher taxes.
(Note: The AMT was passed in 1969 to ensure that a couple of hundred millionaires would pay their "fair share.") For example, exemptions are now $48,450 for individuals and $74,450 for married couples filing jointly.
If Congress fails to act by the end of this year, exemptions will return to $33,750 for individuals and $45,000 for married couples filing jointly.
Marriage penalty. The Marriage Penalty Relief Act. But the previous penalty on marriage is set to kick in again for 2013.
Child tax credit. It will be halved from $1,000 to $500 per child for 2013.
Estate taxes. The "death tax" reverts to a 55 percent rate in January of next year with a $1 million exemption. Many of America's family-owned small businesses will be hit hard by this tax hike.
Capital Gains. Capital gains tax will increase to 20 percent, and dividends will be taxed at ordinary income tax rates. Specifically for individuals and couples earning more than $200,000 and $250,000 respectively, two new health care reform surtaxes will force the capital gains and dividends tax rates even higher: capital gains to 23.8% and dividends to 43.4%.